As we close out 2025, the mortgage landscape is shifting in ways that will significantly impact homeowners heading into the new year. This week’s Mortgage Minute covers four critical developments: the looming renewal payment shock, a rare affordability win in Hamilton, Toronto’s new luxury property tax, and the continued climb in fixed mortgage rates.

The 2026 Renewal Reality: Payment Shock is Coming

Over half of all Canadian mortgages are scheduled to renew in 2026, and many homeowners are about to experience significant payment increases.

The Numbers:

If you locked in a mortgage during the pandemic at rates in the 1-2% range, you’re now looking at renewal rates around 4%. For many homeowners, this translates to a $500-$600 per month payment increase.

Let’s put that in perspective:
– A homeowner who secured a $500,000 mortgage in December 2020 at 1.39% was paying approximately $2,224/month
– Renewing that same mortgage today at 3.94% would mean a monthly payment of $2,800
– That’s a 26% increase, or $576 more per month

What This Means for You:

Banks will send you competitive renewal offers, and in many cases, they’re solid rates. However, don’t just auto-sign your renewal letter without exploring whether restructuring makes more sense for your situation.

Consider a Refinance If:
– You’ve accumulated high-interest debt since you purchased (credit cards, lines of credit, car loans)
– You need to access equity for renovations, investments, or other purposes
– You want to restructure your mortgage to better align with your current financial goals

A refinance allows you to roll high-interest debt into your mortgage at a much lower rate, or unlock equity that’s built up in your home. This can often result in better overall cash flow than simply renewing at your bank’s offered rate.

Source: Canadian Mortgage Professional, WOWA.ca

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Hamilton Sees Rare Affordability Improvement

While most Canadian housing markets remain challenging for buyers, Hamilton stands out as one of the few markets showing real affordability gains.

The Data:

According to Ratehub.ca’s latest affordability report, Hamilton experienced the most significant improvement among major Canadian cities in November:
– Average home prices dropped $12,500
– Qualifying income required decreased by $2,780
– Monthly mortgage payments reduced by $76, saving buyers $912 annually

Why This Matters:

For buyers who have been priced out of the Toronto market, Hamilton represents a legitimate alternative. The numbers are moving in the right direction, and with inventory remaining elevated across Ontario, buyers in the $600,000-$800,000 range have negotiating power.

Hamilton was one of only 12 out of 13 major cities studied that saw affordability improve month-over-month.

Source: Ratehub.ca, Canadian Mortgage Professional

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Toronto Luxury Property Tax: April 2026 Deadline

Toronto City Council approved a graduated increase to the Municipal Land Transfer Tax (MLTT) for luxury properties, effective April 2026.

What Changed:

The new graduated scale affects homes selling for more than $3 million:
– $3M-$4M: 4.40% total MLTT (0.9% increase)
– $4M-$5M: 5.45% total MLTT (0.95% increase)
– $5M-$10M: 6.5% total MLTT (1% increase)
– $10M-$20M: 7.55% total MLTT (1.05% increase)
– Over $20M: 8.6% total MLTT (1.10% increase)

Action Item:

If you’re purchasing a property in Toronto valued over $3 million, closing before April 2026 will save you thousands in land transfer tax. The increase targets the wealthiest 2% of homebuyers and is expected to generate $13.8 million in additional revenue for the city in 2026.

Source: CBC News, Toronto City Council

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Fixed Rates Continue to Climb

Despite the Bank of Canada holding its policy rate steady at 2.25% last week, fixed mortgage rates have continued to tick higher throughout December.

Why Rates Are Rising:

Fixed mortgage rates are tied to bond yields, not the Bank of Canada’s overnight rate. Strong economic data—including GDP growth of 2.6% in Q3 and unemployment dropping to 6.5%—has pushed government bond yields higher, forcing lenders to adjust their fixed-rate pricing accordingly.

What This Means:

The window for “bottom-of-the-market” fixed rates appears to be closing. Borrowers who were waiting for rates to drop further are now watching them move in the opposite direction.

If you’re planning to lock in a fixed rate for a purchase or refinance, waiting may not be in your best interest.

Source: Bank of Canada, Canadian Mortgage Professional, Statistics Canada

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Bottom Line

As we head into 2026, three key themes are emerging:

1. Renewal shock is real – If you’re renewing, explore whether a refinance makes more sense than a straight renewal
2. Regional opportunities exist – Hamilton’s affordability improvement shows that not all markets are frozen
3. Fixed rates are rising – The brief window of sub-4% rates is closing

If you’re buying, renewing, or refinancing in 2026, don’t make decisions in a vacuum. The mortgage landscape is shifting, and having a strategic conversation now can save you thousands over the term of your mortgage.